Q&A: Abinash Verma, Indian Sugar Mills Association

'Isma needs to go beyond lobbying'

The Indian Sugar Mills Association (Isma) has got a new head after 25 years. Abinash Verma, the new director-general, quit the Indian Railway Accounts Service after 21 years, to head the powerful sugar lobby group. The new DG, who served for five years as director in the food ministry, aims to make Isma a more professional body. In an interaction with Ajay Modi, he spells out his priorities and the outlook for the sector. Edited excerpts

You have assumed charge of an organisation that was headed by one person for decades. What will be your priorities?
Among the foremost priorities is to make Isma a professional organisation. Not merely an industry lobby group but an organisation providing professional and technical inputs to member-companies and the government. It should become more research-oriented, improve the system of estimating sugarcane and sugar production, track and analyse domestic and international price trends, help member-factories improve cane yields and sugar recovery, etc.

Bajaj Hindusthan, the country’s biggest producer, is not a part of Isma. Will you take steps to bring it back?
They are welcome to join. They’d need to apply, which requires approval by a committee.

The demand for decontrol has been there for ages. What is your view on the possibilities?
The two most important areas of control that need to be examined are levy sugar obligation on mills and the monthly release mechanism for sale. This is the only industry in the country that is asked to bear the burden of a social welfare programme run by the government. This affects the capacity of mills to make cane payments. As against the regulated release mechanism, mills should be given freedom to decide the timing and quantum of sugar sale, to ensure better cash.

While a move towards decontrol was initiated last year, the recent surge in food inflation has slowed the process.
The recent spurt in food inflation is primarily caused by a rise in prices of vegetables, fruit, egg and dairy products. The year-on-year inflation in sugar is negative to the extent of 30 per cent. In January, mills’ realisation has come down by over Rs 200 per quintal.

Inflation also seems to have dampened the possibilities of export relaxation. What is Isma’s view?
The next year will see a surplus and an opening stock of five million tonnes should be more than adequate. This would leave a clear surplus of 1.8 mt, of which the country could comfortably export over a million tonnes during the current year. The government should allow exports immediately, because after April, the viability in the international market will not be as good. At present, Indian mills have an opportunity to realise Rs 5,000-6,000 per tonne. Sugar prices have been falling continuously and may lead to accumulation of cane arrears. Exports will help in cane payments.

There have been concerns over sugar output. What is the latest?
We are expecting 25 mt in the current season (October-September). This, along with an opening balance of five mt, will give 30 mt during the year. By the current trend of releases, the annual consumption during 2010-11 would be 22 mt. Considering this and export of 1.2 mt under ALS, etc, we will have a surplus of 6.8 mt as on October 1.

The ethanol programme has been re-launched. However, it continues to face some problems and opposition. Is blending a long-term possibility?
The five per cent blending (with petrol) has restarted from October 2010, with a provisional price of Rs 27 per litre. About 600 million litres have been contracted for supplies and supplies of 100 million litres have been made. There has been opposition from some groups to the programme, but the government, the oil companies and the sugar industry are committed to the success of the programme.